Spotify had 165m premium subscribers at the midpoint of 2021, up 20% in the second quarter of the year from 2020. The streaming service added 7m subscribers in Q2, which drove double-digit year-over-year growth across all segments.

The company reported improved average revenue per user, decreased churn, a return to per-user consumption growth and significant advertising strength in Q2.

Revenue of $2.75b was up 23% in Q2 and toward the top end of the company’s guidance range due to significant advertising strength and subscriber outperformance. Premium revenue grew 17% to $2.43b in the three-month period ending 6/30.

Gross margin finished at 28.4% in Q2, above the top end of the guidance range, while premium gross margin was 30.8%. The company has $3.7b in cash and cash equivalents, restricted cash and short-term investments.

During the quarter, Olivia Rodrigo’s SOUR set the record for biggest streaming debut for an album on Spotify this year, with more than 63m global first-day streams. Other major releases in the quarter included BTS’s “Butter,” Griff’s One Foot in Front of the Other and Doja Cat’s Planet Her.

At the end of Q2, Spotify had 2.9m podcasts on the platform, up from 2.6m at the end of Q1. The percentage of monthly active users (that's MAUs to you) who engaged with podcast content on the Spot improved modestly relative to Q1.

CEO Daniel Ek said the company’s strategy remains focused on increasing engagement. “We’ve grown in the past few years from a million creators to 8m creators. The opportunity is to get to 50m creators and get audiences of those creators listening to that content by creating more tools and more monetization opportunities.”

Total MAUs grew 22% to 365m in the quarter, with 9m added. The total was below the company’s guidance range, which may have played a role in a dip in Spot stock on 7/28; shares are down 7.1% as of this writing.

CFO Paul Vogel told analysts on a conference call that the company saw listening patterns start to return to pre-pandemic levels after nearly a year of every day looking like a weekend.

The company noticed significantly less mobility in markets where lockdowns were in effect. “More mobility leads to higher engagement and retention,” Vogel said, noting that Spotify cut back on marketing in places where COVID-19 was significant. The company did not spend any money in Q2 in India, for example.

By the end of the year, Spotify is projecting a premium subscriber base of 177m-181m, total MAUs of 400m-407m and a gross margin of around 25%.

The streamery is still in the early days of creating what Ek termed “enterprise suites” for musicians, saying it's in the “second or third inning" and that "we’re actively going in and learning about customer needs” to create a bespoke product.

The question now is how to dive deeper into the live space. Ek said product tests are ongoing, and digital live concerts during COVID generated “really positive results.”

“It’s in line with our strategy,” he conitnued. “Live will have an even bigger platform, turning listeners into fans and fans into superfans.”

Concerts, he concluded, generate “the vast majority of income to [artists] and Spotify can be helpful, be a better partner. Long term, it’s a very important focus. We’re focusing on the needs of the constituents and after that we focus on how monetize.”

TAGS: Spotify | Daniel Ek | Q2